Thursday, July 05, 2007

No Capital Gains Tax in 2008?

If only that were true... It is true that the capital gains tax rate for low income tax brackets (10% and 15%) in 2008 goes to 0%.

But, before you run out and plan to sell your rental with a 300K gain, be sure you understand that most of that gain will not be taxed at 0%. Bummer, I know...

We don't know what the qualifying incomes are for 2008, but for 2007 they are up to $31,850.00 for individuals and $63,700.00 for married couples filing jointly.

So, if the levels didn't change for 2008 (they usually go up slightly each year) and you are married making 50K/yr as a couple, only the first $13,700.00 of capital gain is taxed at 0%. The remainder is taxed at 15%. So, in the above example, $286,300.00 is taxed at the 15% maximum long term rate.

Don't forget to add your state and/or city taxes into the equation as well. This can easily add another 5-9.5% depending on your state of residence and state of property sale.

And, don't forget the recaptured depreciation tax This doesn't get the 0% break either.

So, don't plan on reaping the entire profit tax free in 2008 if you have a large gain. The IRS isn't quite that generous!

Paula Straub

Fill out a Qualification Questionnaire at to find out if you qualify to hang onto your capital gains.